IBERIAN DAILY 14 JANUARY (ANÁLISIS BANCO SABADELL)
NEWS SUMMARY: ALMIRALL, ROVI, REAL ESTATE SECTOR.
Rates attempt to halt the gains, but stock markets are sceptical
The rising sovereign debt yields continued to penalise stock markets on both sides of the Atlantic, especially bond proxies. With this in mind, in the STOXX 600 the best-performing sectors were cyclical ones like Energy (backed by the rising Brent prices) and Basic Materials, whereas Media, Real Estate and Technology ended with the biggest punishment. On the macro side, P. Lane (ECB) stated that the monetary policy could be relaxed even further, as long as inflation is kept under control. In Spain, the left-wing PSOE presented a housing access plan including higher public guarantees, income tax exemptions for rent and higher taxes for holiday rental and a 100% tax for non-residents and non-EU citizens acquiring homes in the country. On the geopolitical front, Israel and Hamas would be closer to reach a cease-fire. On another note, the US press outlines that D. Trump’s team could impose tariffs gradually to gain negotiating power and offset the impact on inflation. Separately, Nvidia would continue to face overheating problems and failures in its potent Blackwel chip that would be causing large technology groups to cut their orders.
What we expect for today
Stock markets would open with gains of +0.8% with the good performance of growth companies (luxury groups fuelled by China). Currently, S&P futures are up +0.33% (the S&P 500 ended up +0.95% vs. the European closing bell). Asian markets are mixed (China’s CSI 300 +2.48% and Japan’s Nikkei -1.8%).
Today in the US we will learn December’s NFIB (SME) confidence and production prices.
COMPANY NEWS
REAL ESTATE SECTOR
One of the measures announced yesterday by the Spanish PM for housing, which for the most part will have to be approved by Congress, is conditioning the fiscal advantages of the REIT regime to home development through affordable rent. It is not clear whether this means that the current REIT companies without residential housing (like Merlin and Colonial, although the latter has marginal exposure) should be excluded from the REIT regime, as no further details were made public on how the measure will be implemented, if in the end it moves forward. Some sources have suggested the measure will only affect residential housing, and thus the other asset types (offices, logistics, etc.) will remain unchanged.
On another note, there is also a proposal to curb the purchase of homes by non-EU citizens not residing in Spain. Thus, the fiscal burden to be paid by non-EU citizens not residing in Spain will be raised to 100%.
No details on the implementation of these measures were made public if they go through in the end, as it not clear that the government will obtain sufficient support (as seen last November).
In the absence of more specific details, the news on the REITs is negative, but of little impact, as it once again generates uncertainty in the sector, although the impact could be small due to the fact that (i) it may only affect residential housing, and (ii) following the last attempt at a reform, in November’24, we have the feeling that the market was already pricing in some regulatory noise (as the Govt. had given signs that it could again modify the sector’s tax regime). In any event, we recall that Colonial estimates the potential negative impact from the elimination of the REIT regime on IFRS EPA at -1% to -2%. In the case of Merlin Properties, the impact on cashflows (FFO) would be -8.5% assuming that the company remains as it is, but the company clarifies that this number could be lower in the future, because if the tax regime changes the company would be managed differently. In yesterday’s session Merlin fell -2% (the return is -0.5% vs. the 11th of November, before the regulatory noise started) and Colonial -0.4% (-8%).
As for listed developers, we understand the cap on home purchases by non-EU residents mainly affects the most touristic areas with strong exposure to the British and/or non-EU non-resident market, and the listed companies do not have much exposure to this segment. In the case of Neinor, which is the only company to provide data, affected buyers represent ~2% of the company’s presale portfolio. We understand the figure could be higher in Aedas and Metrovacesa, but in any event it would be low. Furthermore, we must not assume this percentage is not covered, as demand is much higher than supply, and thus the gap left by non-EU citizens could be filled by other buyers. Lastly, although here we also reiterate that it is not clear the measure will be effective, given that it must be approved by Congress and the Govt. must fit the tax within a fiscal regulation (which in matters of housing is competence of each Autonomous Community). In short, although we consider this news negative for Spanish developers, we think the reaction on the market yesterday was excessive. Neinor fell -7%, Aedas -3% and Metrovacesa was flat.